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Policy and Procedure ManualChapter 330, Financial Management and Services Responsible Department: Accounting
and Financial Services Direct costs or expenses are recorded in the University general ledger by authorized transactions for initial payments (e.g., invoices, payrolls), recharges from University administrative and service units, and adjustments of expenditures (cost transfers). This section outlines policy and procedures regarding adjustments of expenditures, i.e., when for a variety of reasons, expenditures recorded in the ledgers should have been recorded in a different account. Expenditure adjustments for University Extension concurrent courses are exempt from this section. It is University policy that expenses be charged directly to the account to which they pertain. It is recognized, however, that expenditure adjustments are occasionally necessary to correct bookkeeping or clerical errors in the original charges. It is also recognized that closely related work may be supported by more than one funding source and that in such cases an expenditure adjustment of costs from one funding source to another may be proper. However, departments should avoid frequent, tardy, and unexplained (or inadequately explained) expenditure adjustments, particularly where they involve accounts with significant cost overruns or unexpended fund balances. Such adjustments raise serious questions about the propriety of the adjustments themselves as well as the overall reliability of the University's accounting system and internal controls. See Section 230-06 or the request form in Exhibit A for guidance on spending funds prior to receipt of awards. A. Conditions under which expenditure adjustments are appropriate Once an expense entry has been recorded in an account in the general ledger, it is appropriate to make expenditure adjustments only in the following situations: 1. To correct an erroneous recording, such as when the original source document (e.g., invoice, payroll, purchase order) cited an incorrect account or object. 2. To record a change in decisions made originally as to the use of goods or services (e.g., a case of beakers originally ordered for and charged to a teaching program may be subsequently transferred to a research project). In requesting an expenditure adjustment, a unit administrator is certifying that the original recording was a proper and legitimate charge against the account cited; that the original charge is now being invalidated; and that the second account is the correct one to charge. 3. To redistribute certain high numerical but small individual and/or minor charges (e.g., copy machine rental and paper costs, telephone charges, mailing charges, or charges for office supplies) that are billed to departmental accounts but a portion of which may apply to other accounts under the jurisdiction of the department. Redistribution of costs to Federal and Federal flow-through accounts must be allowable, allocable, and reasonable in accordance with Federal costing principles. While this type of expenditure adjustment is exempt from the requirement in II.B.5, below (reference to the original source documents), departments must maintain internal records/logs of such usage to support the adjustment per the UC Records Disposition Schedules Manual, Section III.F. B. Criteria A request for adjustment of expenditures shall meet the following tests: 1. It must be recorded via the appropriate form, such as the UC Davis Financial Information System (DaFIS) Distribution of Expense (DI), Error Correction (EC), or Restricted Error Correction (REC) document, DaFIS journal voucher (JV); or for payroll transactions, On-Line Payroll Time Reporting System (OPTRS) expense transfer form (EDTS or EDTM), payroll expenditure adjustment request (UPAY646-3 for transactions over 6 months old, or Work-Study Payroll Expense Transfer (UPAY646X-3). 2. Adjustments will be reviewed and approved by Accounting & Financial Services on a sampling basis for compliance with applicable UCD and University policies and terms of funding source agreements. Departments have the option to establish their own criteria when the adjustment is to transfer a cost between restricted non-Federal/non-Federal flow-through funds or between unrestricted University funds, as long as the requirements in 1 and 2, above, are met. When the adjustment is to transfer a cost to a restricted fund provided by an external agency for a specific purpose (e.g., funds provided under a gift, endowment, grant, or contract for a specific purpose), the following are also required: 3. It must be recorded in the general ledger within 120 days of the original charge (for example, the deadline for adjusting a charge that appears in the January ledger will be the May ledger). If because of unavoidable circumstances an adjustment has to be made beyond the 120-day period, a full explanation including a well-documented account of all the events leading to the tardy adjustment must be provided. 4. It must relate to individual items of expenditures (e.g., a cylinder of oxygen or fraction thereof, 2 hours of technician time) incurred by the unit requesting the adjustment. 5. It must contain a reference to the invoice, payroll, or other disbursement documents that initiated the original direct charge. A copy of the original document, annotated to reflect the adjustment, must be kept on file and retained in the department according to the Disposition Schedules guidelines based on "office of record" criteria for audit purposes. 6. It must be in the same amount originally recorded in the University general ledger (i.e., the whole amount or the appropriate fraction charged to or paid by the unit requesting the adjustment). 7. It must be fully explained, justified, and approved by the unit administrators involved in the transaction. (An explanation that merely states that the adjustment being made is "to correct an error" or "to transfer to correct project" or "expenditure inadvertently charged to incorrect account" is not sufficient.) In the case of adjustments that involve Federal grants and contracts, the certification and approval signatures must include that of the principal investigator and the department head or other program official.
Further information may be obtained by contacting Accounting & Financial Services: the Payroll Division for payroll adjustments, the Extramural Accounting Division for adjustments involving extramural funds, the Capital Asset Accounting Division for capital asset adjustments, the Student Employment Center for Work-Study expense transfers, and the General Accounting Division for all other adjustments. A. UC Business & Finance Bulletin A-47, University Direct Costing Procedures, 8/1/94. B. UC Records Disposition Schedules Manual. C. UCD Policy & Procedure Manual Section 330-62, Basic Costing Policy. Copyright © 2006 The Regents of the
University of California, Davis Campus. All Rights Reserved. |
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